PPP Program Developments: What You Need to Know Now

While the original provisions of the Paycheck Protection Program (PPP) did a lot to help small businesses during the early days of the economic shutdown from the Coronavirus pandemic, there were a few wrinkles that needed to be worked out — and I can attest to this personally, based on my own experiences as an applicant. Fortunately, on June 5, 2020, President Trump signed the bipartisan PPP Flexibility Act of 2020, a bill crafted with input from industry groups aimed at refining certain provisions and making them more small business–friendly.

On June 16, the Small Business Administration (SBA), which administers the PPP, released a revised application for PPP loan forgiveness — one of the program’s most important and popular features. The new instructions are also accompanied by a brand-new “EZ” version. The forms implement provisions of the PPP Flexibility Act of 2020 and also address criticism that the original application for loan forgiveness was too cumbersome and document-intensive.

The new EZ form (click here) applies to loans of any size in one of three categories: (1) self-employed borrowers with no employees, (2) borrowers who did not reduce salaries or wages of employees by more than 25% and did not reduce the number or average paid hours of employees (with some exceptions), and (3) borrowers who did not reduce salaries or wages of employees by more than 25% and experienced reductions in business activity as a result of COVID-19–related health directives. A useful checklist helps borrowers determine if they can use the EZ form.

The loan forgiveness feature of the PPP permits business owner recipients to apply for partial or full forgiveness of PPP loans as long as the proceeds are used for approved purposes. Unforgiven balances are to be repaid with 1% interest over five years (the original repayment term was 2 years).

Provisions of the new PPP Flexibility Act that are of most interest to business owners include a lower threshold for the amount of the loan that must be spent directly on payroll expenses. Recipients may now qualify for full forgiveness as long as at least 60% of the proceeds are allocated to payroll (the previous requirement was 75%). The new plan also extends the time available for employers to expend loan proceeds: originally, the deadline was June 30, 2020, but that has now been advanced to December 31, 2020. However, if borrowers expend the funds sooner, they can apply for forgiveness at that time, rather than waiting until the end of the year.

Additionally, the new law expands the safe harbor for employers regarding their ability to restore the same number of employees. Expanded provisions allow for protections against being penalized for reductions due to firings for cause, voluntary resignations, or for voluntarily requested and received reductions in hours. New protections now exist for employers who made good-faith, written offers to rehire individuals employed on February 5, 2020, if the borrower was unable to rehire similarly qualified employees for unfilled positions on or before December 31, 2020. Employers are also protected against penalties for failure to restore employment hours if the employee rejected the offer and elected not to return to work.

It’s no secret that any government program usually comes with unintended consequences and procedural kinks. The new, liberalized provisions of the PPP Flexibility Act of 2020 is a big step toward making sure American small businesses get the help they need, delivered the way they need it.

If I can help you get answers about the program or the application process, please get in touch. To view my recent TV interview about the PPP and small business, click here.

Empyrion Wealth Management (“Empyrion”) is an investment advisor registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. Information pertaining to Empyrion’s advisory operations, services and fees is set forth in Empyrion’s current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Empyrion. The information contained in any third-party resource cited herein is not owned or controlled by Empyrion, and Empyrion does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Empyrion of the third party or any of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner or investment advisor.